The Roth IRA has one distinct advantage over the newly-arrived Roth 401(k).

Here are the 401k Contribution Limits

With a Roth IRA, you can withdraw your initial investment fee- and tax-free at any time. Not so with the Roth 401(k). You can’t withdraw your contribution to a Roth 401(k) until you actually retire.

Should you want to withdraw your contribution from your Roth IRA, simply contact the financial services company where you invest and tell them what you want to do. They’ll be able to tell you the amount you’ve contributed if you don’t remember. Let them know your intentions and they can set the whole thing up. It’s very straightforward.

Now don’t get me wrong. I love the Roth 401(k) and invest a majority of my 401(k) contributions in it. With a Roth (either the 401(k) or IRA) you get your contribution and its gains tax-free at retirement. Pay no taxes on your retirement money – awfully sweet deal if you ask me.

Most people agree, which is why you’ll continually see the advice to fund a 401(k) to the employer match then switch to a Roth IRA. I don’t completely agree, though. I think the better technique is to fully fund your 401(k) then put money into a Roth IRA.

The reason is simplicity. If you have to take two actions every year – fund the Roth IRA and modify your 401(k) contribution somewhere during the year – it’s less likely you’ll actually do it.

So when comparing directly, the Roth IRA has the distinct advantage of your being able to get at your contribution before retirement. Though I don’t recommend raiding your IRA for spending money, a Roth IRA can function as a back-up emergency fund. There are different rules for withdrawing money before retirement from a traditional IRA.